Energy market update

Energy Market Report June 2020

We are pleased to bring you the latest in the energy market trends with thanks to our partners, Fidelity Energy.

Oil prices have started to increase from the plunge they took last month, reaching 18-year lows as the pandemic crippled the global demand for oil and countries came to a halt due to imposed lockdown measures.

As the measures are lifted, the demand for oil is starting to increase, along with oil prices. However, in comparison to before the pandemic, oil prices are still 40% lower in trade price. It is unlikely that they will stay this low for long, as demand across the world continues to steadily increase.

Switching energy is a quick and simple way to make crucial savings at a time it is most needed. We can help you lock in low rates now or even see if you are eligible to switch to a no standing charge tariff, which means you will not have to pay anything if your premises are still shut.

GAS AND ELECTRICITY

Gas and Electricity contract prices still remain low, as they have been throughout April and May. Low demand and warm temperatures have required less reliance on gas, with wind and solar helping to provide the electricity grid.

Weather forecasts this week show lower temperatures and increased wind speeds, which will help to keep contract prices low, as wind generation is expected to take up an increased percentage of the grid.

CRUDE

Oil prices have been climbing steadily since the huge plunge in mid-April. Despite this, current prices are still over 40% lower than at the start of this year.

The upcoming OPEC meeting to discuss extending its historic production cuts agreement has helped increase the price of oil further this week, with reports that Russia is likely to agree to the extended cuts to help support the market.

Current price standings:
Brent Crude = $38.82/bbl
WTI Crude = $35.98/bbl

LIFTED MEASURES INCREASING ENERGY DEMAND

Countries are now pushing one another in a race to see who can ease out of lockdown the quickest by starting to ease their lockdown measures in a hope to stimulate the economies once again.

On Sunday 10th May, the UK government actively encouraged businesses to return to work, if they could not do so from home, as well as lifting some of the measures around travelling for exercise and socialising.

From the 1st June, measures lifted once again, with gatherings of up to 6 people now allowed outside or in gardens, with social distancing measures still to be in place.

The demand has steadily started to climb as business premises open after months of being closed, more people commute to work, drop their children off at schools, drive further from their homes to visit newly open shops, hot spots and to see friends and families for social gatherings.

Oil prices have started to slowly follow suit and contract prices are likely to increase further, as the demand continues to grow for fuel and energy.

US-CHINA TENSIONS

US-China tensions only continue to flare. The Trump administration weighs placing sanctions on Beijing as the country looks to strip rights and freedoms from Hong Kong citizens. Visa restrictions on Chinese Communist Party officials are also being considered.

Asked last week about potential sanctions, President Donald Trump responded that the US would be ‘doing something now’ and vowed that this ‘something new’ would be unveiled by the end of next week, which might lead to a drop in trade prices and even cheaper energy contracts as a result.

UK’S OWN EMISSIONS TRADING SYSTEM

The UK government has confirmed that it will establish its own Emissions Trading System at the end of the Brexit transition period.

This will result in the termination of its participation within the EU ETS. The UK ETS will contain a fixed auction reserve price set at £15/mt and contain a ‘cost containment mechanism’ intended to prevent price spikes. A link may be established between the UK and EU ETS, but negotiations are still ‘ongoing’.

Until it is implemented, we will not know what impact this will have on the prices of energy contracts. But if the UK’s ETS prices slip significantly behind EU’s (thus making UK energy cheaper), Brussels may consider implementing a carbon border tax to prevent a ‘carbon leakage’ of industries moving from continental Europe to Britain.

To see what you could save when you switch your business energy tariff with us, simply contact us for a free review.